Wednesday, May 24, 2023
By NEIL HARTNELL
Tribune Business Editor
Grand Bahama's Chamber of Commerce president yesterday said it was "vital" to business certainty and investor confidence that Freeport gain clarity on whether, and how, corporate tax will be implemented in the Port area.
James Carey, speaking with the Government's own 'green paper' unable to provide answers as to whether corporate income tax could apply in the Hawksbill Creek Agreement free trade zone, told Tribune Business he and the GB Chamber were still assessing the issue and unable to give a "definitive" position yet.
Confirming that he has circulated the 'green paper' to all GB Chamber Board members, as well as Ian Rolle, the Grand Bahama Port Authority's (GBPA) president, he added that he soon hopes to discuss the potential implications with the latter.
Noting the external pressures facing The Bahamas, as a result of the G-20/OECD 15 percent 'minimum' global corporate tax initiative, Mr Carey told this newspaper: "Taxation in any form is incredibly repugnant. More taxes is not something we need right now, particularly in Grand Bahama."
The four corporate income tax reform 'options' floated by the Government would, in many instances, see the new tax replace the Business Licence fee for many companies. However, most Freeport-based businesses pay their licence fees to the GBPA rather than the Government, so one question to be answered is how these fees - and their payment, which represents a valuable revenue stream for the Port - would be impacted.
The Government itself is also uncertain. "Businesses under the Hawksbill Creek Agreement in Freeport are exempt from paying the Business Licence fee, alongside the elimination of property taxes and import duties," it s 'green paper' said.
"For these free trade zones, appropriate Bahamian legal advice would be required to determine whether the application of corporate income tax would be legally possible, though any application of corporate income tax would likely erode the competitive advantage afforded to this area."
Mr Carey, meanwhile, said there needed to be greater government transparency over how the Government is spending tax dollars it collects. "More information needs to be shared on taxation and taxes which are being collected," he argued. "VAT was supposed to be the saviour, and I know some years have gone by, but the taxes keep on coming."
Asked how important it was for Freeport to quickly be given certainty over whether corporate income tax can be levied in the city, the GB Chamber chief replied: "It is vital to know because all the fee structures, licensing structures and pricing is geared to what exists.
"We're also interested in what happens in the rest of The Bahamas. Freeport doesn't always import from the US. It imports from other parts of The Bahamas. There's quite a bit of trade between Grand Bahama and Nassau, so what happens in Nassau impacts us as well. I don't want to be an isolationist. We have to be concerned with what happens around us and affects us.
"Maybe we're not impacted so much by the Hawksbill Creek Agreement protecting us, but we're impacted nonetheless. I'm always concerned as to what happens in the wider Bahamas. The strength of the Hawksbill Creek Agreement is being eroded. There's still an opinion that VAT should not apply legally to Freeport. I don't think that was challenged legally, and it's in effect now, so there it is."
Mr Carey said he had been speaking to Simon Wilson, the Ministry of Finance's financial secretary, to visit Freeport and speak with the private sector to help address "the whole confusion that exists in Freeport with taxation". He added: "We need to see where we're going. Let's stop playing with these things."
The Bahamas has no history of levying or administering an income-type tax, and the costs and bureaucracy associated with enforcing and collecting it are likely to be significant. The Prime Minister, in a foreword to the 'green paper', wrote: "Confronting these challenges are as much about ensuring greater fairness, efficiency and effectiveness in our tax policy regime as it is about supporting fiscal resilience, economic growth and development.
"As it now stands, we have a Business Licence fee that is inherently biased given that it is calculated on revenues (turnover) instead of profits or ability to pay. Consequently, the regime may discourage domestic investment and limit economic growth, and it is not aligned with international best practices.
"At the same time, the imminent adoption of international tax rules for the convergence to a global minimum level of business taxation for large multinational groups require that our business tax regime is aligned with the new rules. As a government, we have already signed on to these rules, and failure to conform will result in the potential loss of revenue," Philip Davis KC continued.
"It is clear to the Government that we must introduce changes in this area, and in the 'green paper' we are laying out the case for this change."